UK unemployment falls to 7.1% after record job surge

Jan 22, 2014

Sharpest fall in unemployment in 17 years is 'good for economy', but wages aren't keeping pace

A RECORD surge in the number of people in work has "exceeded all expectations", but raises the possibility of a rise in interest rates, the BBC reports. 

The number of people out of work fell by 167,000 in the three-month period ending in November, figures released by the Office of National Statistics (ONS) show. It is the largest fall in unemployment during a three-month period in 17 years, says the BBC's chief economics correspondent Hugh Pym.

The fall brings the UK's headline unemployment rate to 7.1 per cent, a rate "not registered since early 2009".

Says Pym: "It is clear that the British economy is creating jobs at a much faster rate than most analysts had predicted."

Data released today by the Office for National Statistics also shows that the number of people claiming Jobseeker's Allowance fell by 24,000 to 1.25 million in December.

While the government is certain to claim the figures show that its austerity measures are working, the fast recovery of the job market has a downside for anyone with a mortgage. Forward guidance issued by Bank of England governor Mark Carney, says the central bank will consider lifting interest rates when unemployment falls to seven per cent.

The strong jobs figures pushed up the value of the pound, which rose 0.4 per cent against the dollar to $1.6541 and 0.5 per cent against the euro to 1.2214 euros.

As usual, London and the South-East showed some of the strongest growth. The Daily Telegraph's regional breakdown of the unemployment figures shows that the biggest percentage fall in unemployment was in the East Midlands.

The Financial Times agrees that the surge in jobs growth is "good news for the UK economy - even if it poses a fresh challenge for the credibility of the Bank of England's so-called forward guidance on rates".

But there's a caveat, the paper says: the slow growth of wages has "consistently upended the rosy picture of a strong recovery".

The ONS figures show that wages grew by 0.9 per cent, including bonuses, for the three months ended in November. That's less than the 1 per cent growth forecast by economists, the FT says.

Considering that inflation is running "at or near two per cent", workers' pay cheques aren't keeping up with rising prices, the paper says.

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